Louise Gartner: New highs

Last week, the major grain markets put in new 2-year highs, before getting weekly reversals down, with corn and beans seeing an outside week lower. Selling was prominent as traders moved to the sidelines to wait out the important crop reports that will be released Wednesday morning.

USDA is slated to release their monthly supply/demand report, the final small grain summary (production), the quarterly stocks report and the winter wheat plantings report on Wednesday morning. The trade is anxious to get the numbers out, as there are many questions to be answered, particularly with corn. Corn supplies are still expected to show a 15-year low. Soybean yields are expected to be higher again following a very good harvest.

Winter wheat plantings are expected to be up about 3.6 million acres, with about 2.0 million more in soft red and 1.6 in hard red. While wheat supplies are basically at a comfortable level, it’s still the amount of quality wheat that headlines the wheat story this year.

Speaking of which, values for hi-pro spring wheat surged this week as the generally tight supply situation was magnified by transportation delays across the northern plains. Heavy snows have stalled farmer movement and rail shipments, creating some very tight supply situations for mills that need the high protein wheat for blending. Values were reported up over $1/bu early in the week before stabilizing late in the week.

This is probably just a harbinger of things to come. Obviously, the mills are operating hand-to-mouth when it comes to the high protein wheat, and supplies will only get tighter as we move into spring when prices tend to peak seasonally. End users tend to do their buying for the summer in late spring which will cover their needs until the harvest rolls in, and is typically why prices tend to peak at that time.

According the U.N.’s World Food Program, global food prices hit all-time highs last month, surpassing the spike high from 2008. They reported that while cereals including rice had not yet hit the 2008 level, sugar and meat prices were at their highest since its records began in 1990. During 2010, wheat prices rallied 47% after a drought in Russia, low quality crops in the US and Canada, and then floods in Australia. US corn was up 50% and soybeans jumped 34%.

Plenty of logic. Just no single strategy.Mark hegg 01/10/2011 @ 6:05pm
Corn ethanol became a priority when fuel prices and hostile international events made the idea of using 'then' cheap corn to supplement transportation fuel to maintain living standards and the security of that standard. Food is still cheap here in the US in any case. CRP was a means to support the rural economy and protect environmentally challenged ground that in most cases provided marginal returns.
Despite the contradictions the goals of these programs were seen as productive. That doesn't eliminate contradictions. All of the programs needed to have a time commitment to make them workable, and surely they should be reviewed. As for those who go hungry, I think in most cases an examination of the process would likely show that the recent increases in price isn't the sole reason, or even the most important reason some go hungry. Remember the argument that cheap exports undermined local farmers in developing countries? In most cases that logic doesn't hold (for other reasons than discussed here) but, where it does, production incentives should surely be high.
Want real economic dislocation? Jerk the rug out from the current criticized policies and watch what happens. Corn and bean production has surged to meet requirements and that is in response to practices and technology adopted to meet market demand signaled by prices. Take away those markets and production would continue but the price squeeze would be a disaster. Can you say 'bail outs'?

wow one solution solves high price fooded lammers 01/10/2011 @ 4:16pm
Seems to me the solution to high price food is acombination of factors and not just the shift of some food grains being shifted to fuel. Should we examine a few. Gasoline pric near highs, livestock numbers down, not only in U S but world wide, except China. population growth, less acres for ag uses, regulations, the uncertian policy making by our gov. and special interest groups with large sums of money trying to scare our ag customers{the public} just the opinion of the writer and is intended for imformative purposes